SINGAPORE (July 6): OCBC says Memtech International stands as a direct beneficiary should electric vehicle manufacturer Tesla make further inroads into the China market.
Tesla recently announced that it is in exploratory talks with the Shanghai municipal government in relation to the possible establishment of a Chinese manufacturing plant.
In a Thursday report, analyst Joseph Ng believes this would allow Tesla to be more competitive in the electric vehicle space, given the possible elimination of a 25% import tariff.
According to the China Association of Automobile Manufacturers (CAAM), 1.75 million passenger cars were sold in May, down 2.6% y-o-y.
However, 45,000 electric cars, plug-in hybrids and fuel cell cars were sold, up 28.4% y-o-y.
Still, OCBC believes Memtech’s automotive segment should still have further room for growth whether the motor car runs on fossil fuel or electricity.
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“We have highlighted previously its potential to participate in platform projects, which involve rolling out new components to both existing and new car models,” says Ng.
Year to date, Memtech has returned 47.7%, outpacing the STI’s 13.9% increase, benefiting in part from the US technology sector rally despite the recent pullback.
As such, OCBC advises investors to wait for a more opportune moment to accumulate and thus maintain its “hold” rating and fair value estimate of 85 cents.
Shares in Memtech are up 2 cents at 93 cents.
